We read with interest Allan Lanthier‘s recent article about estate freezes (National Post,  August 20, 2019). Lanthier is a retired tax partner of an internationally recognized accounting and professional services firm, so he’s knowledgeable on the topic.

It was surprising to read Lanthier’s view that estate freezes allow wealthy Canadians to avoid tax.   In his own words: “As assets pass from one generation to the next (in Canada) there is a significant amount of capital gains tax to pay. Or at least there would have been had the “estate freeze” not been invented (the italics are ours).



Lanthier is correct in writing that capital gains tax is due on appreciated assets (including shares in a privately owned business) when the assets pass from one generation to the next.  What he doesn’t mention is the tax rate in most provinces is in excess of 25%.   It raises a question.  How would the estate of any business owner raise 25% of the business value in cash in order to pay a tax due on death?  In many cases this would be impossible to achieve, and would force the family to sell the business.

Furthermore, the sale wouldn’t be planned and executed in an orderly manner, but rather under adverse circumstances.  Think of a fire sale to a specialty buyer or a purchase by a financial buyer with an extreme short-term view.  Is this the outcome we want for our homegrown Canadian businesses?  (See our research report focused on the impact of Canada’s top business families on our nation’s economy).

Estate freezes, together with other tools, allow Canadian business owners to manage their tax liability by spreading it into affordable “packages” that can be anticipated, planned for, and funded in an orderly manner. Estate freezes do not allow business owners to avoid tax.

CMG knows from our experience that Canadian business families pay their taxes, and that estate freezes – far from a tool to avoid tax – actually help these families to manage, plan for and pay their taxes.

Lanthier opens his article by mentioning that Canada‘s top 25 business families, in aggregate, are worth over $200 billion.  He neglects to mention that, estate freezes or not, these families will end up paying a quarter of that figure – over $50 billion – in estate taxes over time.

Perhaps we should be thanking them.


Peter Creaghan is a co-founder and partner at Creaghan McConnell Group